Guy Hands’ Terra Firma remains defiant in the face of reports that creditors and hedge funds are circling beleaguered care-home provider Four Seasons.
Four Seasons Healthcare, Britain’s largest care-home operator, with more than 20,000 elderly residents was Terra Firma’s largest investment since its purchase of EMI, but it is struggling with interest payments of more than £50m a year on debts of more than £500m and this summer launched a financial review after losses rose to £26m in the second quarter.
A number of American hedge funds have begun to buy into the company’s senior secured debt, expecting a shake-up soon, and HCP, a US investment trust and one of the company’s main lenders, has hired Rothschild and Freshfields to begin looking into restructuring the company's finances, the Sunday Times reported this weekend.
But Terra Firma was adamant: “No discussions have taken place with any of the lending banks or debt holders with regard to a debt-for-equity swap in connection with Four Seasons and no such conversations are contemplated at this time.”
And it said Four Seasons residents had nothing to fear:
The group has sufficient medium-term financial flexibility. We can envisage no scenario that would have any effect on the quality of care for the residents living in our homes, or patients in our specialist care units.
If creditors do push for a debt for equity swap, Hands, who runs Terra Firma from tax-haven Guernsey, could be forced out. Terra Firma bought the care-home provider for £825m in 2012, using £325m of its own funds.
Rothschild declined to comment.